| While mortgage interest rates are still near historically | | | | appraised value is $200,000. You give your child a gift |
| low levels. home prices are depressed, it is a buyers | | | | of equity for as little as $7,000 (fha's 3.5%) then your |
| market, which means a seller can and may help to | | | | child, assuming $0.00 additional down payment, would |
| contribute up to 6% of the purchase price towards | | | | apply for a mortgage in the amount of $197,000. There |
| closing costs allowed by FHA, the government has | | | | will also be closing associated with the mortgage and |
| their tax credit for first time home owners, FHA still | | | | purchase of the property. if your child does not have |
| has a program which requires only 3.5% down | | | | sufficient funds, you may also as the seller of the |
| payment. Sometimes all the above still falls just short | | | | property, offer to contribute up to 6% of the purchase |
| from assisting home buyers in qualifying for their | | | | price or in this case, $12,000 towards the closing costs. |
| mortgage. The role of a parent never ends to help | | | | (The closing cost should not necessarily be this high, |
| their children. | | | | the $12,000 is being used for illustrative purposes.) |
| As a parent, helping our children can be subtle yet very | | | | 3. Another way a parent may assist their child in |
| important when they are buying their first home and | | | | purchasing a home is as a non occupant co-borrower. |
| there are many ways a parent may be able to assist. | | | | This is very helpful if your child's income falls short of |
| 1. Teach them how to be responsible, which also | | | | qualifying for the mortgage on their own. You as the |
| includes making them understand how vital their credit | | | | parent would apply for the mortgage with your child |
| history and also other facets of their credit will have a | | | | who would live in the property as their primary |
| direct effect on their lifestyle. Teach them how their | | | | residence yet you the parent would not, therefore the |
| credit will impact their standard of living due to interest | | | | "non occupant" part of the co-borrower. Your income |
| rates they will qualify for, the amount of any loan | | | | and assets may be used for qualification purposes. |
| payments, how much of a mortgage they will qualify | | | | The parent as a non occupant coborrower would take |
| for, not to mention the ease at which they may be | | | | title to the property with the child and would also be |
| qualified for credit if they need it. | | | | responsible for the mortgage payment with the child. |
| 2. Parents may also assist their children in buying a | | | | We are in the midst of what may be the greatest |
| home by offering them a gift toward their down | | | | opportunity in one's lifetime to purchase a home. The |
| payment and/or closing costs. This gift which is | | | | above scenario's are not only available for parents, |
| allowed by Fannie Mae, Freddie Mac and also FHA | | | | any close relative or person with an established close |
| (check with your loan professional for guidelines | | | | personal relationship may be eligible to assist in the |
| pertaining the particular loan programs) may come in | | | | ways mentioned above. |
| two forms. The first form is as a cash gift where the | | | | We are in the midst of what may be the greatest |
| child may use these funds towards their down | | | | opportunity in one's lifetime to purchase a home. The |
| payment. FHA will allow a cash gift from parent for | | | | above scenario's are not only available for parents, |
| the entire required minimum down payment of 3.5% of | | | | any close relative or person with an established close |
| the purchase price. | | | | personal relationship may be eligible to assist in the |
| A gift may also come in the form of equity which is | | | | ways mentioned above. |
| already in your property. This would be possible if you | | | | If we teach our children well, it may become |
| decided to sell your child your own home. The way | | | | contagious and they will assist their child when it |
| this works is: you set a purchase at or below the | | | | comes time to buy a home, to realize the American |
| appraised value of the property in which you agree to | | | | Dream and you never know, the above parameters |
| seal your home for. Then you may also agree to give | | | | not only a apply to a parent helping a child, the same |
| your child a gift of equity from as little as 3.5% to as | | | | requirements will apply if a child wants to assist their |
| much as you wanted to.i. e: Purchase price and | | | | parent(s) so teach your children well. |